Forecasting Financial Crashes: Revisit to Log-Periodic Power Law

Bingcun Dai, Fan Zhang, Domenico Tarzia, Kwangwon Ahn

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

We aim to provide an algorithm to predict the distribution of the critical times of financial bubbles employing a log-periodic power law. Our approach consists of a constrained genetic algorithm and an improved price gyration method, which generates an initial population of parameters using historical data for the genetic algorithm. The key enhancements of price gyration algorithm are (i) different window sizes for peak detection and (ii) a distance-based weighting approach for peak selection. Our results show a significant improvement in the prediction of financial crashes. The diagnostic analysis further demonstrates the accuracy, efficiency, and stability of our predictions.

Original languageEnglish
Article number4237471
JournalComplexity
Volume2018
DOIs
Publication statusPublished - 2018 Jan 1

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Genetic algorithms

All Science Journal Classification (ASJC) codes

  • General

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Dai, Bingcun ; Zhang, Fan ; Tarzia, Domenico ; Ahn, Kwangwon. / Forecasting Financial Crashes : Revisit to Log-Periodic Power Law. In: Complexity. 2018 ; Vol. 2018.
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Forecasting Financial Crashes : Revisit to Log-Periodic Power Law. / Dai, Bingcun; Zhang, Fan; Tarzia, Domenico; Ahn, Kwangwon.

In: Complexity, Vol. 2018, 4237471, 01.01.2018.

Research output: Contribution to journalArticle

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